Future Looks Bright for This Little-Known Niche Market

Future Looks Bright for This Niche Market StockAcuity Brands, Inc. (AYI) manufactures lighting, and business is really good. The Atlanta-based company just reported an excellent quarter and the stock blasted higher after handily beating consensus on earnings and revenues.

The stock has been a powerhouse, up five-fold since its 2009 low, and has been especially strong over the last 12 months, like so many other positions.

Acuity Brands provides all kinds of indoor and outdoor lighting and its products are sold all over the world. Any application you can name, this company likely makes a light for it. The company’s products are mostly for industrial/commercial use in offices and buildings, but the company also produces lighting for sports facilities, underwater applications, garages, emergency exits, decorative and landscape applications, and parking lots, along with some residential lighting.

Then there are all the controls and components required to make the lighting work. Acuity Brands manufactures these as well.


In its fiscal first quarter of 2014 (ended November 31, 2013), the company said it achieved all-time records in first-quarter sales, earnings, and diluted earnings per share.

Total sales for the quarter came to $574.7 million, representing a solid 20% gain over the first quarter of 2013.

Earnings were $44.5 million, representing a substantial 70% gain over the comparable quarter (including a $5.0 million insurance recovery gain).

Acuity Brands finished its fiscal first quarter with cash and cash equivalents of $398 million, for a gain of $39.0 million over the previous quarter. Management said it expects demand for its lighting products to improve and become more broad-based. The renovation and tenant (improvement) markets are expected to be growth areas.

On the stock market, Acuity Brands jumped 15% on the day of its earnings report. The company’s one-year stock chart is featured below:

Acuity Brands, Inc. NYSE Chart

Chart courtesy of www.StockCharts.com

The fact that this position is richly priced did not deter investors from bidding the stock after its latest earnings on a down day for the broader market. The company surpassed Wall Street’s expectations by a wide margin and once again demonstrated just how good a business it is. (Read about another stock that’s excelling in its business in “Why This Company Should Be a Case Study in Business Schools.”)

I view Acuity Brands’ results as a positive economic indicator and I give credit to the company for filing its SEC form 10-Q commensurate with its earnings press release.

With the exception of a one-percent unfavorable impact to sales due to currency translation, all of the company’s increased sales during the latest quarter were due to stronger volume. The company cited North American sales were increasing especially significantly. LED-based lighting, which represented just over one-quarter of the company’s total first-quarter sales, saw sales more than double comparatively.

Management estimates that the North American lighting market, which is helped by new construction, renovation, and retrofitting, should grow by the mid-single digits in fiscal 2014. Wall Street currently expects the company’s fiscal 2014 total sales to grow approximately 10% and nine percent in fiscal 2013.

I suspect the Street’s revenue and earnings estimates for Acuity Brands’ future periods will creep higher over the coming weeks. The company’s fiscal first quarter was very solid.

Other than monetary policy, the most important data for equity investors is what corporations say about their businesses. For industrial lighting, business conditions are improving.